TMI Blog2016 (4) TMI 125X X X X Extracts X X X X X X X X Extracts X X X X ..... is Elevator Company (India) Limited Versus Commissioner Of Income-Tax [1991 (4) TMI 53 - BOMBAY High Court]. Hon’ble High Court of Delhi in the case of CIT Vs Samtel Color Ltd ( 2009 (1) TMI 26 - DELHI HIGH COURT ) has held that admission fee paid to Corporate Membership was an expenditure incurred wholly and exclusively for the purposes of business and not towards capital account as it only facilitated the smooth and efficient running of a business enterprise and did not add to the profit earning apparatus of a business enterprise - Decided in favour of assessee MAT applicability - whether the provisions of Sec. 115JB of the Act are applicable to the assessee or not? - Held that:- We have perused the orders of the Co-ordinate Bench for the assessment year 2007-08 we find that the Co-ordinate Bench following the decision in the case of Krung Thai Bank PCL Vs DIT [2010 (9) TMI 18 - ITAT, MUMBAI ] directed the AO to exempt the assessee from the applicability of provisions of Sec. 115JB of the Act.- Decided in favour of assessee Credit for Dividend Distribution Tax u/s. 115-0 - Held that:- We find considerable force in the contention of the assessee. It is the submission of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also because tax as defined in Section 2(43) does not include Dividend Distribution Tax so as to make appeal permissible in terms of Tax appearing in Section 246A( 1) of the Act. 3. At the outset, the Ld. Counsel for the assessee submits that except ground No. 3 5 the issues in other grounds are decided in favour of the assessee in assessee s own case for earlier assessment years. 4. With respect to ground No. 1 i.e. whether profit on sale of investment is liable to be taxed in the hands of the assessee or not, the Ld. Counsel for the assessee referring to page-1 of the compilation which is the order of the Co-ordinate Bench in assessee s own case for assessment years 2002-03 to 2004-05 in ITA Nos. 6500 to 6502/M/205 submits that the Co-ordinate Bench adjudicated the matter in favour of the assessee following the decision of the Pune Bench in the case of Bajaj Allianz General Insurance Company Limited Vs Addl CIT in ITA No. 1447/PN/07 C.O. No. 57/PN/07 dated 31.8.2009 holding that profits on sale of investment prior to the assessment year 2011-12 are not taxable in the hands of the assessee. The Ld. Counsel for the assessee submits similar view has been taken by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 6. What is taxable in the case of the insurance companies is, as we have noted above, is not commercial profit as per the normal rules of computation of business 9 General Insurance Corporation of India income but the profit reflected by accounts drawn up as per the provisions of the Insurance Act. Any adjustment to such profits can only be made as per specific provisions in Clause 5 of First Schedule to the Income Tax Act. It is not the case of the revenue that, in accordance with the provisions of the Insurance Act, these profits were required to be reflected in the annual accounts of the assessee, or that there is a specific adjustment, duly sanctioned by law, which was required to be made to such book profits in respect of these book profits. On a plain reading of the provisions of the law, such profits cannot be brought to tax in the first place. When these profits cannot be taxed in the first place, there is no need of any specific exemption provision. The principle of casus ommisus is not, therefore, relevant in the present context. 7. In the case of Bajaj Allianz (supra), the coordinate bench has, inter alia, observed as follows:- 6. The ld CIT (A) has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. In addition to the above contentions there was no dispute that the independent code is enacted by the introduction of sec 44 in IT Act which independently prescribed the mode and manner for assessment of Insurance Business. This section since contains non-obstante clause therefore notwithstanding anything contained in any of the sections of the Act, the profits and gains of Insurance Business including any such business carried on by a Mutual Insurance Company or by an Co-operative Society shall be computed in accordance with the rules contained in First Schedule. Accordingly, there could not be any other Income taxable other hand Insurance Business because section 44 over-rules all other provisions of the IT Act. 8. A conclusion can be drawn on the basis of the above elaborate discussion that the deletion of sub-rule (b) from Rule 5 of the first Schedule was with a specific purpose. This schedule not only prescribe the method of computation of income of Insurance Business in Part (A) but also prescribe the method of computation of other Insurance Business in Part (B). Rule 5 is within Part (B) and earlier it was prescribed the method of taxation of profit on sale of inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee gets the relief accordingly . Respectfully following the said decision, we direct the AO to exclude profit on sale of investments from income of the assessee as not liable to be taxed. 7. With respect to ground No. 2 i.e. deleting the disallowance made by the AO on account of expenditure u/s. 14A of the Act, the Ld. Counsel for the assessee referring to page-117 of the compilation submits that the issue has been decided in favour of the assessee in assessee s own case for assessment year 2006-07 in ITA No. 6260/M/08 dated 10.12.2010. 8. We have perused the orders of the Co-ordinate Bench in assessee s own case for assessment year 2006-07 and we find that the Co-ordinate Bench decided the issue in favour of the assessee following various decisions of the Tribunal observing as under: Grounds of appeal no.4 regarding the expenditure u/s 14A. 8. We have heard the rival contentions and perused the relevant record. We note that this issue has been considered and decided by the Pune Bench of this Tribunal in the case of Bajaj Allianz General Insurance Company limited V/s Add. CIT in ITA No.1447/PN/2007 for the assessment year 2003-04 order dated 31.08.2009. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t clearly provides that income from insurance business has to be computed in accordance with the rule contained in the First Schedule. It is not the case of the Revenue that the assessee has not computed the profits and gains of its insurance business in accordance with the said rules. Reliance was placed on the scope of s. 144, as held in the case of General Insurance Corporation of India v. CIT [1999] 156 CTR (SC) 425 : [1999] 240 ITR 139 (SC), wherein their Lordships of the apex Court have categorically held that the provisions of s. 44 being a special provision govern computation of taxable income earned from business of insurance. It mandates the tax authorities to compute the taxable income in respect of insurance business in accordance with the provisions of the First Schedule to the Act. In the light of these, their Lordships of Delhi High Court have held that no question of law, much less a substantial question of law survives for their consideration. In other words, order of the Tribunal has been affirmed. Following the same reasoning, addition made by the AO is deleted. 22. We have considered the rival contentions and gone through the records. The provisions of s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... drawn that since the Courts have held, s. 44 creates a special provision in the cases of assessment of insurance companies therefore it was not permissible to the AO to travel beyond s. 44 of First Schedule of IT Act. 18. The next common dispute relates to the order of the CIT(A) in sustaining the action of AO in allowing only 50 per cent of the management expenses by invoking the provisions of s. 14A of the Act. The addition is made by the AO on the plea that the provisions of s. 14A was inserted by Finance Act, 2001 w.e.f. 1st April, 1962. It is stated that the investments made by the assessee are both taxable as well as tax free. An estimated disallowance of 50 per cent out of the management expenses incurred and as claimed in the P L a/c is treated as expenses incurred in connection with the looking after tax-free investment. 19. The learned counsel for the assessee vehemently argued that the income of the assessee is to be computed under s. 44 r/w r. 5 of Sch. 1 of the IT Act. Sec. 44 is a non obstante clause and applies notwithstanding anything to the contrary contained within the provisions of the IT Act relating to computation of income chargeable under differe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... automatically goes in favour of the assessee. 9. Accordingly, by following the earlier orders of this Tribunal, we decide this issue in favour of the assessee . Respectfully following the order of the Co-ordinate Bench in assessee s own case we decide this issue in favour of the assessee. 9. The next issue in the appeal of the Revenue is that the Ld. CIT(A) erred in allowing club expenses without appreciating the fact that assessee failed to establish that these expenses are for business purposes. 10. The AO while completing the assessment disallowed club expenses holding that assessee has not incurred these expenses for the purpose of business. The Ld. CIT(A) deleted the disallowance. 11. The Ld. DR vehemently supports the order of the A.O on disallowing the club expenses. The Ld. Counsel for the assessee supports the order of the Ld. CIT(A) and further placing reliance on the decision of the Hon ble Bombay High Court in the case of Otis Elevator Co (India) Ltd Vs CIT (195 ITR 682) submits that the club expenses incurred by the assessee enables to improve the relations and prospects. The Ld. Counsel submits that it is impossible to keep record of every person v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. CIT(A) erred in entertaining the ground of appeal regarding credit for Dividend Distribution Tax u/s. 115-0. 16.1. The Ld. DR submits that the issue of credit for Dividend Distribution Tax is not emanating from the order of assessment and is not one of the specified issue u/s. 246A on which appeal can be preferred. 16.2. The Ld. Counsel for the assessee submits that assessee has paid Dividend Distribution Tax of ₹ 58,00,00,000/- and the AO has given credit to the extent of ₹ 48,00,00,000/-. Further referring to the order of the Ld. CIT(A), he submits that Ld. CIT(A) has directed the AO to verify the contention of the assessee that in terms of provisions of Sec.115-O , the liability for Dividend Distribution Tax of ₹ 58.56 crores was paid vide challan dated 21.9.2010 and grant credit for Dividend Distribution Tax paid by the assessee company. Therefore, the Ld. Counsel further referring to the provisions of Sec. 115-O submits that in addition to Income tax chargeable in respect of the total income of a domestic company and if such company distributes profits by way of dividend, such profits/dividend shall be charged to additional income tax. Therefore, h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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